Here are 5 mistakes to avoid and suggestions for a better way to achieve your goals.
Benjamin Franklin is usually credited with the phrase: “Time is Money.”
As business owners, time management is crucial. We’re busy people and must make every minute, and every dollar, count. Certain business goals may be commendable, but often our efforts to see them through don’t pan out, wasting time and more. It’s probably because we go about things all wrong. I examined this topic a number of years ago, but think it’s worth revisiting now.
1. Failing to make accurate estimates
Billing for what you’re worth is one of the most challenging aspects of a business. When you’re giving a quote for a job, you have to estimate how much time and materials you’ll need to complete it properly. But if you give an inaccurate estimate—one that falls short of the actual costs for doing the job—customers perceive that you’ve been lying to them. You’ll wind up losing money or a customer, which is not your goal.
Better way: |
If the job is for your services, bill by the hour instead of charging for the entire project so you know you’ll be properly compensated. If you must provide an estimate, then use software or apps designed for your industry to help you create a better, more accurate, estimate so that both you and your customer are satisfied. |
2. Asking for something without any compensation
Want a referral? Want responses to your questionnaires? Want employees to do more? These are all good goals. But merely asking for action likely will produce only a minimal response.
Better way: |
To receive a better response, offer compensation. Examples: a gift certificate or future discount for referrals; a chance to win something for answering a questionnaire; a bonus or a raise an employee’s extra efforts. Make the compensation commensurate with the effort that you’re asking for. |
3. Charging customers for breakage
You don’t want to lose money when customers break or damage your business property. If you have a retail store and post signs such as “you break it, you buy it” to warn shoppers of their obligation to pay for items they accidentally damage or break probably isn’t worth the paper they’re written on. To recover your loss, you’d have to sue and likely wouldn’t collect—an accident is merely a cost of doing business. Of course, if a remorseful customer offers to pay for the damage, accept it gladly.
Better way: |
Make sure your insurance provides adequate protection for such losses. Any losses not reimbursed by insurance are fully deductible (or otherwise accounted for in the cost of goods sold) as a business expense on your tax return. |
4. Charging interest for late payments
If you send invoices for goods shipped or work performed and aren’t paid on time, you try to charge interest by adding a note on the invoice that there’s 1% late charge or such. But don’t bother because I’ve never heard of any customer paying the interest.
Better way: |
Get paid when the work is being done—via credit card, check, cash, Apple Pay, or PayPal—so you don’t have to wait for payment following an invoice. Apps and simple devices (such as Square for a smartphone or tablet) make it so easy to get paid on the spot. For big jobs, you may have to collect partial payment as phases of the work are completed. For goods that are shipped, get paid up front or upon delivery (e.g., UPS will collect C.O.D. up to $50,000). |
5. Continuing in-house collection efforts
You want to be paid on time. This is crucial for your cash flow. A report several years ago from Fundbox found that the small businesses had $825 billion in unpaid invoices, and that 81% of the average amount owed to small businesses was 30 days past due. When a customer is late in paying a bill, you may resend an invoice and then follow up with a phone call or email. Maybe you’ve even offered to let the customer pay it off in installments. Unfortunately, after a couple of efforts on your part, further hounding by you likely won’t induce payment.
Better way: |
Turn delinquent accounts receivable over to a collection agency. While you won’t get the full amount you’re owed (the agency keeps a percentage of what it collects), at least you increase the chances of getting some payment. Or have your attorney send a collection letter threatening legal action for nonpayment (something that’s feasible only if significant sums are involved to justify the time and collection of this pursuit). Even better, follow the advice in #4 above and get paid on the spot so you’re not chasing customers for payment. |
Final thought
Identify the biggest time wasters in your day so you can eliminate them. To help you with this, the SBA has a booklet entitled Time Management for a Small Business.
